# Average Daily Rate (ADR) for Short-Term Rentals — Formula and Benchmarks

> ADR is your average nightly revenue per booked night. Learn how to calculate it, benchmark it against your market, and use it to maximize STR income.

Canonical: https://www.underwriteapp.com/learn/average-daily-rate


## Definition

**Average daily rate** (ADR) is the average revenue earned per booked night. It is the most widely used pricing metric in both traditional hospitality and short-term rentals.

$$\text{ADR} = \frac{\text{Total Room Revenue}}{\text{Total Nights Sold}}$$

ADR answers: **how much am I earning per night that I actually rent?**

It does not account for vacancy. That's what separates it from [revpar](/learn/revpar), which measures revenue across all available nights.

## How to Calculate ADR

**Formula:**

$$\text{ADR} = \frac{\text{Total Room Revenue}}{\text{Total Nights Sold}}$$

**Worked example — 3BR mountain cabin:**

- 18 nights booked in a month
- Total room revenue: $5,130
- **ADR: $5,130 ÷ 18 = $285/night**

Note: room revenue means revenue from the accommodation itself, not cleaning fees, pet fees, or other add-ons. Some operators include all revenue in the numerator — just be consistent when benchmarking.

## ADR vs. Occupancy Rate — Two Sides of the Same Coin

ADR and [occupancy-rate](/learn/occupancy-rate) measure different dimensions of performance:

| Metric | What it measures | What it ignores |
|--------|------------------|-----------------|
| ADR | Revenue per booked night | How many nights went unsold |
| Occupancy Rate | % of available nights booked | What you charged per night |

A high ADR with low occupancy can underperform a moderate ADR with strong occupancy. That's the fundamental pricing tension in STR investing: maximize rate or maximize fill rate?

## ADR × Occupancy = RevPAR

The relationship between all three metrics:

$$\text{RevPAR} = \text{ADR} \times \text{Occupancy Rate}$$

**Example:**

| Property | ADR | Occupancy | RevPAR |
|----------|-----|-----------|--------|
| A | $285 | 60% | $171 |
| B | $220 | 78% | $172 |

Properties A and B have nearly identical RevPAR — but through completely different strategies. Property A commands a premium rate but fills fewer nights. Property B prices lower and fills more nights. Neither is inherently better; the optimal approach depends on your cost structure (turnovers, cleaning, wear) and local market dynamics.

[revpar](/learn/revpar) is the number to optimize. ADR and occupancy are the levers.

## How to Benchmark Your ADR

Comparing your ADR in isolation is meaningless. You need context:

**1. Compare to your immediate comps.** Tools like AirDNA, Rabbu, and PriceLabs show ADR for comparable listings (similar bedroom count, amenities, and location). If your ADR trails your comps by 20%, you may be underpricing. If it leads by 30%, check whether your occupancy is suffering.

**2. Track ADR month-over-month.** ADR should rise during peak season and fall in shoulder/off-season. A declining ADR trend during peak months is a warning sign.

**3. Break it down by booking window.** Last-minute bookings often sell at a discount. If a large share of your bookings are last-minute, your blended ADR will be lower than your rack rate.

## How to Increase Your ADR

### 1. Use dynamic pricing

Static pricing leaves money on the table. Dynamic pricing tools adjust your nightly rate in real time based on demand signals: local events, competitor availability, booking pace, and seasonality. PriceLabs, Wheelhouse, and Beyond Pricing typically improve ADR by 10–25% over static pricing for active STR markets.

### 2. Upgrade high-ROI amenities

Certain amenities command a meaningful ADR premium:

- **Hot tub**: +$30–$80/night in many markets
- **EV charger**: growing premium in urban and suburban markets
- **Fast Wi-Fi (1 Gbps+)**: increasingly expected for work-from-home travelers
- **Game room or home theater**: strong premium in family/group travel segments

Focus on amenities that are scarce among your comps, not ones that are already standard.

### 3. Improve listing quality

Your ADR ceiling is capped by how well your listing converts browsers to bookers. Professional photography, a compelling title, and a detailed description with accurate expectations all improve your conversion rate. A listing that justifies a higher rate must also *feel* worth that rate at first impression.

### 4. Refine your minimum stay rules

A 3-night minimum protects against high-turnover costs but can also screen out higher-paying 1–2 night guests. Test different minimums by season. Many operators use longer minimums (5–7 nights) during peak weeks to attract higher-value guests, and shorter minimums during shoulder periods to fill gaps.

### 5. Optimize for the right guest segment

Family groups, corporate travelers, and event guests often have higher willingness-to-pay than budget travelers. Positioning your listing for the right segment — through photos, description, and platform selection — can shift your ADR meaningfully without changing the underlying property.

## Common Mistakes

**Optimizing ADR without watching RevPAR.** A 20% ADR increase that drops occupancy by 30% is a net loss. Always track RevPAR as the outcome metric.

**Including cleaning fees in ADR calculations.** This inflates the number and makes benchmarking meaningless. Use room revenue only.

**Ignoring [NOI](/learn/net-operating-income) and total return.** ADR is a revenue metric. It says nothing about what you paid for the property or what it costs to operate. A property with a $500 ADR purchased for $2M may underperform a $180 ADR property purchased for $400K on a yield basis. Always model ADR alongside NOI and cap rate to evaluate the full picture.